Markets
Mapped: The Salary Needed to Buy a Home in 50 U.S. Metro Areas
Check out the latest 2023 update of the salary needed to buy a home in the U.S.
The Salary Needed to Buy a Home in 50 U.S. Metro Areas
Check out the latest 2023 update of the salary needed to buy a home in the U.S.
Over the last year, home prices have risen in 49 of the biggest 50 metro areas in the United States.
At the same time, mortgage rates have hit seven-year highs, making things more expensive for any prospective home buyer.
With this context in mind, today’s map comes from HowMuch.net, and it shows the salary needed to buy a home in the 50 largest U.S. metro areas.
The Least and Most Expensive Metro Areas
As a reference point, the median home in the United States costs about $257,600, according to the National Association of Realtors.
| Median Home Price | Montly Payment (PITI) | Salary Needed | |
|---|---|---|---|
| National | $257,600 | $1,433.91 | $61,453.51 |
With a 20% down payment and a 4.90% mortgage rate, and taking into account what’s needed to pay principal, interest, taxes, and insurance (PITI) on the home, it would mean a prospective buyer would need to have $61,453.51 in salary to afford such a purchase.
However, based on your frame of reference, this national estimate may seem extremely low or quite high. That’s because the salary required to buy in different major cities in the U.S. can fall anywhere between $37,659 to $254,835.
The 10 Cheapest Metro Areas
Here are the cheapest metro areas in the U.S., based on data and calculations from HSH.com:
| Rank | Metro Area | Median Home Price | Monthly Payment (PITI) | Salary Needed |
|---|---|---|---|---|
| #1 | Pittsburgh | $141,625 | $878.73 | $37,659.86 |
| #2 | Cleveland | $150,100 | $943.55 | $40,437.72 |
| #3 | Oklahoma City | $161,000 | $964.49 | $41,335.41 |
| #4 | Memphis | $174,000 | $966.02 | $41,400.93 |
| #5 | Indianapolis | $185,200 | $986.74 | $42,288.92 |
| #6 | Louisville | $180,100 | $987.54 | $42,323.15 |
| #7 | Cincinnati | $169,400 | $1,013.37 | $43,429.97 |
| #8 | St. Louis | $174,100 | $1,031.70 | $44,215.56 |
| #9 | Birmingham | $202,300 | $1,040.51 | $44,593.35 |
| #10 | Buffalo | $154,200 | $1,066.29 | $45,698.05 |
After the dust settles, Pittsburgh ranks as the cheapest metro area in the U.S. to buy a home. According to these calculations, buying a median home in Pittsburgh – which includes the surrounding metro area – requires an annual income of less than $40,000 to buy.
Just missing the list was Detroit, where a salary of $48,002.89 is needed.
The 10 Most Expensive Metro Areas
Now, here are the priciest markets in the country, also based on data from HSH.com:
| Rank | Metro Area | Median Home Price | Monthly Payment (PITI) | Salary Needed |
|---|---|---|---|---|
| #1 | San Jose | $1,250,000 | $5,946.17 | $254,835.73 |
| #2 | San Francisco | $952,200 | $4,642.82 | $198,978.01 |
| #3 | San Diego | $626,000 | $3,071.62 | $131,640.79 |
| #4 | Los Angeles | $576,100 | $2,873.64 | $123,156.01 |
| #5 | Boston | $460,300 | $2,491.76 | $106,789.93 |
| #6 | New York City | $403,900 | $2,465.97 | $105,684.33 |
| #7 | Seattle | $489,600 | $2,458.58 | $105,367.89 |
| #8 | Washington, D.C. | $417,400 | $2,202.87 | $94,408.70 |
| #9 | Denver | $438,300 | $2,139.02 | $91,672.45 |
| #10 | Portland | $389,000 | $1,987.37 | $85,173.08 |
Topping the list of the most expensive metro areas are San Jose and San Francisco, which are both cities fueled by the economic boom in Silicon Valley. Meanwhile, two other major metro areas in California, Los Angeles and San Diego, are not far behind.
New York City only ranks in sixth here, though it is worth noting that the NYC metro area extends well beyond the five boroughs. It includes Newark, Jersey City, and many nearby counties as well.
As a final point, it’s worth mentioning that all cities here (with the exception of Denver) are in coastal states.
Notes on Calculations
Data on median home prices comes from the National Association of Realtors and is based on 2018 Q4 information, while national mortgage rate data is derived from weekly surveys by Freddie Mac and the Mortgage Bankers Association of America for 30-year fixed rate mortgages.
Calculations include tax and homeowners insurance costs to determine the annual salary it takes to afford the base cost of owning a home (principal, interest, property tax and homeowner’s insurance, or PITI) in the nation’s 50 largest metropolitan areas.
Standard 28% “front-end” debt ratios and a 20% down payments subtracted from the median-home-price data are used to arrive at these figures.
Markets
3 Reasons Why AI Enthusiasm Differs from the Dot-Com Bubble
Valuations are much lower than they were during the dot-com bubble, but what else sets the current AI enthusiasm apart?
3 Reasons Why AI Enthusiasm Differs from the Dot-Com Bubble
Artificial intelligence, like the internet during the dot-com bubble, is getting a lot of attention these days. In the second quarter of 2023, 177 S&P 500 companies mentioned “AI” during their earnings call, nearly triple the five-year average.
Not only that, companies that mentioned “AI” saw their stock price rise 13.3% from December 2022 to September 2023, compared to 1.5% for those that didn’t.
In this graphic from New York Life Investments, we look at current market conditions to find out if AI could be the next dot-com bubble.
Comparing the Dot-Com Bubble to Today
In the late 1990s, frenzied optimism for internet-related stocks led to a rapid rise in valuations and an eventual market crash in the early 2000s. By the time the market hit rock bottom, the tech-heavy Nasdaq 100 Index had dropped 82% from its peak.
The growing enthusiasm for AI has some concerned that it could be the next dot-com bubble. But here are three reasons that the current environment is different.
1. Valuations Are Lower
Stock valuations are much lower than they were at the peak of the dot-com bubble. For example, the forward price-to-earnings ratio of the Nasdaq 100 is significantly lower than it was in 2000.
| Date | Forward P/E Ratio |
|---|---|
| March 2000 | 60.1x |
| November 2023 | 26.4x |
Lower valuations are an indication that investors are putting more emphasis on earnings and stocks are less at risk of being overvalued.
2. Investors Are More Hesitant
During the dot-com bubble, flows to equity funds increased by 76% from 1999 to 2000.
| Year | Combined ETF and Mutual Fund Flows to Equity Funds |
|---|---|
| 1997 | $231B |
| 1998 | $163B |
| 1999 | $200B |
| 2000 | $352B |
| 2001 | $63B |
| 2002 | $14B |
Source: Investment Company Institute
In contrast, equity fund flows have been negative in 2022 and 2023.
| Year | Combined ETF and Mutual Fund Flows to Equity Funds |
|---|---|
| 2021 | $295B |
| 2022 | -$54B |
| 2023* | -$137B |
Source: Investment Company Institute
*2023 data is from January to September.
Based on fund flows, investors appear hesitant of stocks, rather than overly exuberant.
3. Companies Are More Established
Leading up to the internet bubble, the number of technology IPOs increased substantially.
| Year | Number of Technology IPOs | Median Age |
|---|---|---|
| 1997 | 174 | 8 |
| 1998 | 113 | 7 |
| 1999 | 370 | 4 |
| 2000 | 261 | 5 |
| 2001 | 24 | 9 |
| 2002 | 20 | 9 |
Many of these companies were relatively new and, at the peak of the bubble in 2000, only 14% of them were profitable.
In recent years, there have been far fewer tech IPOs as companies wait for more positive market conditions. And those that have gone public, the median age is much higher.
| Year | Number of Technology IPOs | Median Age |
|---|---|---|
| 2020 | 48 | 12 |
| 2021 | 126 | 12 |
| 2022 | 6 | 15 |
Ultimately, many of the companies benefitting from AI are established companies that are already publicly traded. New, unproven companies are much less common in public markets.
Navigating Modern Tech Amid Dot-Com Bubble Worries
Valuations, equity flows, and the shortage of tech IPOs all suggest that AI isn’t shaping up to be the next dot-com bubble.
However, risk is still present in the market. For instance, only 33% of tech companies that went public in 2022 were profitable. Investors can help manage their risk by keeping a diversified portfolio rather than choosing individual stocks.
Explore more insights from New York Life Investments.
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